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Forex - Implications of US Philly Fed, Claims, Housing Starts/Permits

[Economic Data]

More strong data, Philly Fed highest since 1984, that unlikely to persist but signals for Feb ISM manufacturing are positive.

Initial claims remain low and imply another strong payroll in Feb.

Housing starts and permits release sees a mixed breakdown but both series exceed expectations.

The latest set of US data provided more upside surprises, most dramatically in the case of Feb's Philly Fed, up to 43.3 from an already strong 23.6 (remember the 18.7 Feb Empire State survey was well above consensus.

The latest Philly Fed is the highest since Jan 1984. Since the 1980s we have only been in the 40s once, 41.2 in Dec 1993. That surge did not persist but we spent the whole of 1994 in the high teens or the 20s. It appears we can be positive about prospects for Feb's ISM manufacturing survey.

The Philly Fed breakdown is generally upbeat, with new orders at 38.0 versus 26.0. Employment and prices paid were marginally slower but still healthy. Prices received slowed to 10.6 from 26.8, a hint that New Year price hikes seen in Jan's PPI and CPI will prove above trend, though trend does seem to be rising.

Initial claims at 239k versus 234k remain very low. Next week will be the survey week for Feb's payroll but currently the 4 week average stands at 243.5k, down from 247.5k in Jan's survey week, and 263.8k in Dec's. We already know that payrolls gained momentum in Jan.

Jan housing starts and permits at 1246k and 1285k were also stronger than expected, if less impressively. Starts fell by 2.6% only because Dec was revised up to 1279k from 1226k.

The starts breakdown showed singles up and multiples down, permits saw multiples up but singles down. The single starts rise leaves the series below the recent high but the single permits decline was corrective from a very strong Dec. Trend in single permits looks firm and that should keep single starts supported.

Multiples have no clear direction and in fact the picture for multiple permits looks fairly stable. Multiple starts in Jan were in line with trend, which is underperforming multiple permits on accounts of two very weak months, in Sep and Nov, which were never easy to explain. DS

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Data

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